(Reuters) -UK's SIG (LON:SHI) on Wednesday said it expected annual underlying operating profit at the lower end of current market expectations, as the building materials supplier fights weak demand in its European markets and a spike in operating costs.
Analysts expect full-year underlying operating profit within a range of 65.3 million pounds ($82.94 million) to 84 million pounds, according to company-compiled estimates.
Shares in the London-listed firm dropped more than 7% in morning trade.
"We expect weak and uncertain demand conditions throughout the rest of the year, along with a continued, but further moderating, revenue tailwind from input price inflation," the company said in a statement.
The Sheffield-based company, which sells roofing and insulation materials in Britain and some other European countries, also said its like-for-like revenue for the first half of the year was flat due to a softening of demand in France, Germany, Poland and Ireland.
The European Central Bank has been raising interest rates at the fastest pace on record over the past year to combat stubborn inflation, weakening demand for bank credit and slowing everything from the housing market to construction and consumer spending.
Worries over higher mortgages due to Bank of England's interest rate hikes also appear to be feeding through to the housing market, with another building materials company Travis Perkins (LON:TPK) saying last month it expected British housing market weakness to hit its profits.
"Whilst trading in recent weeks leads us to be more cautious as to the timing of any broad-based improvement in demand conditions, the second half will benefit from ongoing productivity initiatives as well as an expected profit on one specific property move," SIG further said in the statement.
($1 = 0.7875 pounds)